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Sprint, Clearwire Reach Deal on WiMax, LTE Services

The deal lays the foundation for the deployment of Clearwire's planned LTE Advanced-ready overlay network.

Network operator Sprint Nextel (NYSE:S) and Clearwire (NASDAQ:CLWR) announced agreements potentially worth up to $1.6 billion over the next four years in payments for WiMax services, possible prepayments for Long-Term Evolution (LTE) services and potential equity investments.

The agreements modify prior wholesale pricing agreements and provide Sprint with unlimited access to Clearwire's WiMax network to meet its growing 4G data demands. Under the terms of the agreements, Sprint will pay Clearwire $926 million, about two-thirds of which will be paid in 2012, for unlimited 4G WiMax retail services during 2012 and 2013. The agreements establish long-term usage-based pricing for WiMax services in 2014 and beyond. Sprint will have access to Clearwire's WiMax network through at least 2015. Sprint plans to continue selling WiMax devices with two-year contracts through at least 2012 and support those devices through the life of the contract.

The deal lays the foundation for the deployment of Clearwire's planned LTE Advanced-ready overlay network and outlines the terms for Sprint to gain access to the additional LTE capacity. The TDD-LTE rollout will capitalize on Clearwire's spectrum resources to deliver on 4G capacity needs over the long term. Under the terms, Sprint will pay Clearwire up to $350 million in a series of prepayments over up to two years for LTE capacity if Clearwire achieves certain build-out targets and network specifications by June 2013.

The agreements also establish long-term usage-based pricing for LTE services for 2012 and beyond. The companies have agreed to collaborate on a network build plan and will jointly select LTE macro-cell sites to cover Sprint's high usage area hotspots. Clearwire plans to seek additional funding before initiating the build-out of its LTE Advanced-ready network.

Further reading

"Today's announcement further cements the mutually beneficial relationship between our two companies," Erik Prusch, president and CEO of Clearwire, said in a statement. "It is an important step toward meeting Clearwire's key goals of extending our current 4G network arrangement, securing a commitment to our future LTE Advanced-ready network, and funding the business. We continue to move closer to realizing the full value of our deep spectrum resources as we are uniquely positioned to meet the rapidly growing demand for 4G mobile broadband."

In addition, the agreement contains separate pricing for re-wholesaling by Sprint that is designed to provide flexibility for Sprint to grow its 4G WiMax wholesale business while at the same time providing Clearwire with increased pricing flexibility that could allow the company to grow its wholesale markets and attract new customers.

"These agreements are a result of the technical MOU [memorandum of understanding] we outlined during our third quarter results call and extend our relationship with Clearwire," Sprint CEO Dan Hesse said in a statement. "It provides Sprint improved pricing, allows us to continue to provide WiMax 4G services to our customers today and to new customers in the future, and provides additional LTE capacity to help complement our Network Vision strategy and meet our customers' growing data demands."

Clearwire and Sprint said they also plan to work collaboratively to support the ecosystem for TDD-LTE in Band Class 41 for devices, chipsets and standards. Subject to the timing of the build-out and other factors, Sprint expects to launch devices including laptop cards and phones that will utilize Clearwire's TDD-LTE network in 2013.